Tracy Corrigan is a columnist and assistant editor of the Daily Telegraph, who writes mainly on business and finance. She was previously with the Financial Times, most recently as head of the Lex Column.

Second-guessing the Independent Commission on banking

The Independent Commission on Banking, established this week, is not due to report back until September 2011. Though its remit includes broader issues of financial stability and competition, its real focus is the lingering question of whether to split retail and investment banking (in imitation of the old Glass-Steagall law brought in after the US Great Depression in the US).

This is how the coalition government has accomodated Liberal Democrat policy – personified by Vince Cable – of splitting the banks. We already know what Mr Cable thinks should happen. He has remained vocal on the issue, even after the election, suggesting last week that there is an obvious "direction of travel" towards splitting investment and retail banking.

This seems to be rather jumping the gun. But then, I reflected, perhaps we already know quite a bit about how the members of the new commission feel about the matter.

Then there is Martin Taylor. Although he is no longer a journalist (he was once editor of the FT's Lex column) we know quite a bit about what he thinks too. First there is the fact that he sold part of BZW to Credit Suisse, when he was running Barclays. Admittedly, that was a dozen years or so ago, but more recently Mr Taylor, now chairman of Syngenta, gave evidence before Future of Banking Commission put together by the consumer group Which?. He described a talk he gave shortly after leaving Barclays, in which he said that "the investment banking activities of a universal bank were at all times parasitic on the retail bank balance sheet. I used the word carefully and I wouldn't change that view now. I think there are serious dangers and if your are going to have universal banks you'd better be sure you regulate them very carefully and vey hard" Not exactly a vote for a split, but as Mr Cable might say, he seems to be travelling in that direction.

The only woman on the team is Clare Spottiswoode, who did quite a bit of splitting up when she was the gas industry regulator in the 1990s. More recently she sat on the Future of Banking Commission, which unanimously recommended a different sort of split – the separation of investment advice from the execution of trading. Which? chief executive Peter Vicary-Smith calls this "Volcker-plus", a reference to the proposal by Paul Volcker in the US to split off proprietary trading. (And I agree with the Commission that this is both a more workable and a more relevant split than either Volcker or Glass-Steagall.)

So far, I make that two against splitting, and two in favour of a split of some sort: the Volcker-plus option could prove to be some sort of compromise.

What, though, are the views of Sir John Vickers, the economist and former head of the Office of Fair Trading who will chair the inquiry? Sadly, I can't find any evidence that he has opined on this issue. This is what we do know. His background at the OFT suggests he will fight for a better deal for the consumer. He is not afraid of breaking with tradition: as warden of All Souls College in Oxford, he recently scrapped its famous entrance exam, consisting of a one-word essay question. He wants the government to reduce the budget deficit, mainly by cutting spending.

Despite years of experience in identifying trends on the basis of very thin evidence, I have to admit that I'm stumped. But the man has given a lot of speeches and sat on a lot of committees. He must surely have left some traces of his views on the structure of the banking industry somewhere…

I still reckon a full division between retail and investment banking is both undesirable and unworkable – the latter, because the rest of Europe operates a universal banking system. My guess is that the Commission won't recommend a Glass-Steagall split, but the Commission members will have some interesting recommendations on competition, conflicts of interest and the consumer.